Dan Rooney, Chairman, President and Chief Executive Officer, commented, "The solid increase in bookings during the first quarter of 2012, led by photonics and international solar orders, reflect a positive sign that our customers are beginning to recover from the global recession. During the past several quarters we have been adapting to changes in our solar customers' growth plans as they respond to negative disruption in market conditions and also scaling the company's production capabilities. As a result of our investments in production equipment we are positioned to be more efficient and profitable as market conditions improve. While the near-term issues have been challenging, the outlook for the solar industry remains attractive long term. We are encouraged by the sequential quarter and year-over-year improvement in backlog. The recent introduction of new product based on our prior research and development activities are anticipated to benefit our performance and penetration of niche markets."

Backlog at March 31, 2012 increased to $2.9 million from $1.7 million at December 31, 2011 and was higher than the $2.6 million on the same date a year ago.

First Quarter 2012 Results

Total revenue

Total revenue was $1,883,032 for the first three months of 2012 compared with $2,517,634 for the same period last year. Product revenue was $1,814,542 for the first quarter 2012 versus $2,312,298 a year ago. This decline was attributable to a major customer who ceased manufacturing in the first quarter 2011 and to lower cost for a high value raw material used to manufacture product. Contract research revenue declined to $68,490 for the first quarter 2012 from $205,336 for the first quarter 2011 due to planned completion of grants and awards related to government programs.

Gross profit

Gross profit was $315,145 for the first quarter 2012 compared with $547,538 for the same period a year ago. As previously noted, this decline was principally due to a major customer who ceased manufacturing in the first quarter 2011, change in product mix and additional depreciation due to equipment acquired during the past twelve months to scale the company's manufacturing operations.

Operating expenses

Operating expenses, which include marketing and sales, general and administrative, and R&D, declined 18% to $490,403 for the three months ended March 31, 2012, from $596,590 for the same period last year. First quarter 2011 operating expenses included higher costs related to development of innovative transparent conductive oxide systems.

Loss Applicable to Common Shares

The first quarter 2012 loss applicable to common shares was $195,801, or $(0.05) per share, versus a loss of $76,744, or $(0.02) per share, last year.

EBITDA

Earnings before interest, income taxes, depreciation and amortization (EBITDA) were negative $37,000 for the first quarter 2012 versus EBITDA of $71,409 for the same period last year. Adjusted EBITDA, which excludes non-cash stock based compensation, was negative $1,904 compared with $102,774 a year ago.

About SCI Engineered Materials, Inc.

SCI Engineered Materials, Inc. manufactures ceramics and metals for advanced applications such as photonics, thin film solar, thin film batteries, and semiconductors. SCI Engineered Materials is a global materials supplier with clients in more than 40 countries. Additional information is available at http://www.sciengineeredmaterials.com.

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Those statements include, but are not limited to, all statements regarding intent, beliefs, expectations, projections, customer guidance, forecasts, and plans of the company and its management, and specifically include statements concerning adapting to changes in solar customers' growth plans, scaling the company's production capabilities, positioned to be more efficient and profitable as market conditions improve, outlook for the solar industry remains attractive long term, encouraged by sequential quarter and year-over-year improvement in backlog, and the recent introduction of new product based on prior research and development activities are anticipated to benefit future performance. These forward-looking statements involve numerous risks and uncertainties, including, without limitation, other risks and uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings, including the Company's Annual Report on Form 10-K for the year ended December 31, 2011. One or more of these factors have affected, and could in the future affect, the Company's projections. Therefore, there can be no assurances that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company, or any other persons, that the objectives and plans of the company will be achieved. All forward-looking statements made in this press release are based on information presently available to the management of the Company. The Company assumes no obligation to update any forward-looking statements.